“Growth” isn’t a word we can expect to hear in most industries for a long time — most, but not all…
One industry that’s seen its numbers increase this past year is one you might not expect: corporate training.
That’s right: In the wake of our current financial turmoil, many companies are making the decision to invest in an asset that’s not always noticed by investors… their people.
According to Josh Bersin, president of Bersin & Associates, a research firm that tracks enterprise learning and talent management, “Corporations are investing heavily in current and up-and-coming leaders. We see an emphasis in this area across all sectors. Looming retirements, gaps in management talent and economic pressures are causing companies to funnel dollars into their leadership pipelines.”
Those economic pressures are coming to a head this year as the 500 largest companies have already lost almost 43% in the last 11 months. Now companies are attempting to streamline their businesses by getting more out of their talent pools.
Bersin’s group estimates that the almost $59 billion corporate learning market grew 5% in 2007, a number that’s bound to rise as more and more companies opt to save money by outsourcing their training operations.
But the economy isn’t the only reason the corporate training market looks good… The industry has wide margins and is important enough to big business’s bottom line that training won’t be going anywhere anytime soon.
Outsourcing is the key to profiting from the corporate training world. When companies outsource their educational initiatives to companies that focus on teaching professionals full time, they can take advantage of big cost savings and training programs superior to what they can design in-house.
And the trend’s being proven by the profits corporate trainers are raking in. Small-cap companies like FranklinCovey and SmartPros are a couple of firms that have seen their quarterly incomes increase in the last quarter because of it. But one company stands out from the rest…
GP Strategies Corp. (GPX, Financial) is a diversified training solutions and performance improvement company. It’s diversified because its business covers all aspects of the performance-improvement market — from e-learning to training to engineering, GPX is in the business of making companies run better.
And it’s running itself pretty well in the process…
In 2007, the company increased its net income 46%, to $9.68 million, and widened its margins 14% in the last quarter. But we’ll get back to the financials in a bit…
The company is involved in a pretty varied line of businesses. Besides its bread and butter — the corporate training arm — it’s also involved in engineering and consulting, a couple of lucrative businesses that helped GPX’s sales grow to $248 million in 2007. Additionally, the company has been growing itself through strategic acquisitions, including two that contributed to more than one-third of the company’s overall sales.
The company also has a sizeable $140 million backlog, which means it’s not lacking for customers right now. The company expects to recognize much of its backlog as revenue this year.
GP Strategies has more than 500 clients, most of whom are Fortune 500 companies. The primary industries it services include automotive, oil and gas, chemical, technology and government. Its industry specialization gives it a competitive advantage over other corporate training vendors that don’t have the expertise GPX can bring to the table.
The company’s financials are also rock solid. The company has working capital of $21.1 million and no long-term debt, giving it quite a bit of security right now. GPX also has positive free cash flow of almost $8 million.
What is it doing with its cash? Well, for starters, it’s using it to buy back stock and extinguish debt. GPX has an aggressive stock buyback plan that ate up almost $4 million last quarter. It also retired just over $4 million of debt. Both moves are great for investors.
With a current share price of $3.98, you’re paying less than 72 cents on the dollar for GPX’s book value — that’s a hard deal to pass up. We’ll be keeping tabs on this stock over the next few months to see how it performs.
Cheers,
January 13, 2009
By Jonas Elmerraji, www.pennysleuth.com
